The effects of founding members on organizational ambidexterity in emerging technology ventures : the moderating role of leadership and ownership

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The effects of founding members on organizational ambidexterity

in emerging technology ventures:

The moderating role of leadership and ownership

Name: Tim Kroone

Student number: 10438467 Date of submission: March 9, 2015

Program: MSc in Business Administration - Strategy Track Institution: University of Amsterdam

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Statement of originality

This document is written by Student Tim Kroone who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

Ambidexterity theory has proven to be important concept in explaining firm performance for small-medium enterprises and large firms. Although, the underlying dynamics to achieve ambidexterity in these two type of firms differ. Emerging technology ventures shift between the two types of firms and are an important source for developing new technologies. So far, literature on ambidexterity has not incorporated these ventures. This study seeks to discover the effects of ambidexterity on the performance of these ventures and explores if the founders of these ventures have a role in achieving ambidexterity. By combining ambidexterity theory and upper echelon theory the management context of these ventures is analysed. Board management by founders is hypothesised to influence ambidexterity and strengthened if founders have leadership and ownership. Multiple sources of public secondary data on technology ventures undergoing an initial public offering were combined and used to perform quantitative methods for testing the hypotheses. The findings indicate that ambidexterity has a positive effect on the performance of these emerging technology ventures. There was no evidence found for the relationship between the founders of the entrepreneurial ventures and the ambidextrous capability of the firm. The findings of the study contribute to the ambidexterity literature by establishing the ambidexterity performance relationship in the context of emerging technology ventures. However, limitations in the employed methods the generalizability of the study. Further research on the founders and the emerging technology ventures is required to explore the exact dynamics with ambidexterity theory.

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1. Introduction

Technology companies such as Facebook, Tesla and Amazon changed the way we live our current life. All these companies once started as an emerging entrepreneurial technology venture and successfully used and commercialized new technologies while still being at a young age. Entrepreneurial technology ventures are an important source for developing new technologies that creating wealth (Shane, 2004). However, to successfully develop a new technology and to bring it to the market is complex and therefore it is more likely to see these new ventures fail than succeed (Gompers & Sahlman, 2001). The industry of most technology firms is characterized by a highly competitive and dynamic environment that brings rapid changes in product and process cycles (J. J. P. Jansen, Van Den Bosch, & Volberda, 2005). To cope with such environmental pressures technology firms need to simultaneously exploit current technologies and capabilities, and explore for new technologies and capabilities. By doing so they are able to generate rents on the current technologies but also allows them to respond to future changes. This focus on the present and the future is not as simple as it sounds as fundamental differences in resources, capabilities and learning processes exist between the two activities and that makes managing both complicated because conflicting interests will cause tensions and contradictions (Levinthal & March, 1993; March, 1991). The strategy to do so and overcome these challenges is called organizational ambidexterity and is reached by balancing high levels of exploitation and exploration. When also integrating exploitation and exploration in order to achieve strategic coherence, organizational ambidexterity is seen as a dynamic capability and essential for long term survival (O’Reilly III & Tushman, 2008). The extensive literature stream on ambidexterity primarily focused on the organizational structure and subsequently the individual context as main designs to become ambidextrous (Gibson & Birkinshaw, 2004; M. L. Tushman & O’Reilly III, 1996). To support these designs an important role for the top management team (TMT) is found in differentiating structures, integrating strategy and creating a supportive context for individuals through leadership (Gibson & Birkinshaw, 2004; J. J. Jansen, Tempelaar, Van den Bosch, & Volberda, 2009; Smith & Tushman, 2005). The majority of the ambidexterity literature is built upon the focus on large

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established firms and with a lesser extent on small medium enterprises (SME). While successful emerging technology ventures, with a high paced growth and development fall in between the two as they shift from first to the latter, making the context of these ventures understudied in the ambidexterity literature (Lubatkin, Simsek, Ling, & Veiga, 2006). Additionally, the founders of these ventures and the qualities they possess are nowadays an important topic of research in the business literature.

To accomplishing this characteristic growth and development the private venture needs to be in fueled with resources which regularly come from a high risk private equity investors, namely venture capital (VC)(Barry, Muscarella, Peavy III, & Vetsuypens, 1990). They invest in return for an equity stake in the venture and means to exercise control. These dynamics contribute to the unique operating context of technology ventures in which the founder that build, shaped and still leads the venture gives up ownership and control in return for investments (Simsek, Jansen, Minichilli, & Escriba-Esteve, 2015). Little is known about this entrepreneurial context and its dynamics with organizational ambidexterity but some similarities exist. Management and leadership characteristics that predict organizational ambidexterity are characteristics associated with founders of new ventures (Corman, Perles, & Vancini, 1988). In addition, the competitive and dynamic environment of these ventures create external pressure to pursue an ambidextrous strategy (Auh & Menguc, 2005; J. J. P. Jansen, George, Van den Bosch, & Volberda, 2008). However, there are other key actors in this context that may have an impact on firm strategy (Simsek et al., 2015). As previously mentioned, emerging ventures are often controlled by the high risk investor VC (Kaplan & Stromberg, 2001; Sapienza, Korsgaard, Goulet, & Hoogendam, 2000). These investors specialize in the investment in emerging technology ventures and are the major market player for such investments (Gorman & Sahlman, 1989). After the investment VC not only owns a part of the venture, a strong interplay seems to exist between them and the founders as they not only supply capital but also assist and complement the venture with operational experience, financial expertise, market knowledge, recruitment skills and networks (Hellmann & Puri, 2002; Sapienza, 1992). As such, it is probable that in addition to the founders of the firm VC plays an important role in

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shaping the strategy of the venture. Each of the actors have their own goals and interest in developing the venture. To assess the interplay between the founder and investor the board of directors (BODs) is the level of analysis. At this level, the division of power and control between the two regarding the venture can be deduced.

This study will focus on the on the entrepreneurial context of the technology venture and explore its links with ambidexterity. More specifically it investigates if the amount of founders active in the highest management layer of the firm, BODs, effects ambidexterity. By following the reasoning of upper echelon theory and research on entrepreneurial characteristics and behavior, founding members bear characteristics and goals that will contribute to organizational ambidexterity and this is supposed to be reflected in the strategy of the firm (Chang & Hughes, 2012; Hambrick & Mason, 1984; Lubatkin et al., 2006). Therefore, a higher founder ratio active on the board of directors should amplify this effect. Also, a higher founder ratio on the BODs will contribute to the integration of the board and contribute to a shared vision (J. J. Jansen et al., 2009). Further, as instruments exists that provide board members additional power, it investigates if these instruments strengthen the previous relationship. Founding members that enjoy a leadership position on the BODs increase the board influence they have resulting in a greater impact on ambidexterity. Ownership power could also impact the link between the amount of founders and organizational ambidexterity as it provides the founder the legitimacy to make strategic decisions. Finally this study will try to establish a link between organizational ambidexterity and the performance of emerging technology ventures. It investigates if organizational ambidexterity is a capability necessary for emerging technology ventures and if the founders of these ventures effects this capability.

This study seeks to provide a deeper understanding of the entrepreneurial context and its link with ambidexterity theory. Little is known about organizational ambidexterity in the entrepreneurial context of emerging technology ventures. In the ambidexterity literature, new ventures are almost ignored (Lubatkin et al., 2006). Not only will this study try to establish if organizational ambidexterity positively affects performance for these ventures, it also explores if the key actors in these ventures

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have qualities that promote organizational ambidexterity. This will result in a better comprehension of the dynamics within the governance of the entrepreneurial technology venture building on upper echelon theory and ambidexterity.

First, this thesis starts with a literature review focused on organizational ambidexterity and the entrepreneurial context. It then follows with a theoretical framework to support the hypothesis, with a description of the methodology that is used for the research and the results that have been found. After that a discussion will follow and conclude this thesis.

2. Literature Review

2.1 Exploitation, Exploration and Ambidexterity

Ambidexterity theory entails that firms need to focus on short term objectives as well as long term objectives in order to survive in the uncertain business environment (Levinthal & March, 1993). While short term objectives are generally reached by exploiting the current practices and satisfy the current demands of the firm, long term objectives are reached by exploring for new practices to determine the future demands of the firm (March, 1991). While both exploitation and exploration are each essential for firm survival, each activity requires its own strategy and specialization to develop. Exploitation is focused on the current certainties and results from the refinement of current knowledge and brings incremental innovation, at the same time exploration is focused on the unforeseeable future and results from new knowledge that brings radical innovation (Levinthal & March, 1993).

Instead of taking this from dichotomous perspective, firms can choose to pursue both and find a balance between exploitation and exploration. By doing so, they are able to deal with the demands of the current environment while also being able to adapt to the demands of the future. Put differently, firms must either align their current day to day processes and adapt to the changing environment of the future (Gibson & Birkinshaw, 2004). This gives an advantage as firms focusing solely on exploitation face the threat of organizational inertia known as the success trap, while firms focusing solely on

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exploration face the threat of innovating without reaping any benefits known as the failure trap (Levinthal & March, 1993). Thus, by combining both activities firms obtain a higher chance of survival. The strategy of performing both activities simultaneously is called organizational ambidexterity and has proven to have a positive impact on various performance outcomes such as financial performance, growth and market performance (Raisch & Birkinshaw, 2008).

In becoming ambidextrous firms face a major challenge as exploitation and exploration do not only vary in objectives, they also vary in capabilities, processes and resources required by the firm to perform each activity (Benner & Tushman, 2003; M. Tushman, Smith, Wood, Westerman, & O’Reilly, 2010). Whereas exploitation is characterized by efficiency, refinement, incremental improvement and control, exploration is characterized by experimentation, flexibility, radical improvement and autonomy (O’reilly III & Tushman, 2013; Sarkees & Hulland, 2009). Hence, the corporate structure and culture required to execute these activities are different, if not contrasting. Firms that stimulate experimentation require a loose organizational structure while firms that stimulate efficiency require a tight organizational structure (March, 1991). Because of these differences, executing the two activities within the firm causes tensions as each activity requires its own routines and learning processes (Lubatkin et al., 2006; March, 1991). To build and sustain these routines and processes, firms need to invest resources and since resource interdependency exist within the firm a distribution has to be made between the two activities (J. J. P. Jansen, Simsek, & Cao, 2012). Another tension arises from the core goal of the activity as the future demands of the firm might replace or decimate the current practices of the firm (M. Tushman et al., 2010). To successfully accommodate an ambidextrous strategy is therefore challenging and requires specific designs to overcome these tensions.

The literature stream on ambidexterity describes multiple designs to accomplish a balance between exploitation and exploration on the organizational level (O’reilly III & Tushman, 2013). A firm performing the sequential ambidexterity strategy switches its strategy from exploiting to exploring or vice versa, the structural ambidexterity strategy requires a structural separation between the exploring and exploiting units while the contextual ambidexterity strategy creates an environment in which

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individuals are able to choose and vary between the activities themselves (Gibson & Birkinshaw, 2004). The effectiveness of each design is dependent on the characteristics of the firm and its environment. Research on sequential ambidexterity found that this design is most effective in slow changing environments while the structural and contextual designs are more effective in dynamic and competitive environments (O’reilly III & Tushman, 2013).

In order to achieve structural ambidexterity, firms should have a structural separation between the different business units in order to balance the ambidextrous activities. This means separate subunits, business models and distinct alignments for each, but also different competencies, incentives, processes and cultures, each internally aligned within the business unit. These units are held together by a common strategic intent, an overarching set of values and targeted structural linking mechanisms to leverage shared assets (O’Reilly III & Tushman, 2008). Research on the subject emphasized the importance of various linking mechanisms between the structural differentiated activities to enable this leverage and strategic intent (J. J. Jansen et al., 2009). The literature stresses the importance of the top management team (TMT) integration between the structurally differentiated units to enable a strategic coherence and resource allocation between the units (J. J. P. Jansen et al., 2008). In addition, a mediating role for integration mechanisms was found to enable knowledge transfers and combining knowledge between the exploratory and exploitative units and enable ambidexterity (J. J. Jansen et al., 2009).

The contextual ambidexterity strategy solves the tension between exploitation and exploration at the individual level. Gibson & Birkinshaw (2004) were the first who looked beyond the structures of the firm to focus on the individual to achieve organizational ambidexterity. By creating an environment that is characterized by stretch, discipline, support and trust individuals are encouraged to make their own decisions between exploitation and exploration. Management can direct this decision by creating the right instructions and incentives (Gibson & Birkinshaw, 2004). In this sense a single business unit can be ambidextrous without separating ambidextrous activities from each other.

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Research on both structural and contextual ambidexterity acknowledges the role of the TMT in creating an ambidextrous strategy. The TMT of the firm plays a crucial role in differentiating the ambidextrous units, integrating resources and capabilities, and creating a common and overseeing strategic intent while also fostering an supporting environment for individuals (Gibson & Birkinshaw, 2004; J. J. P. Jansen et al., 2005; J. J. Jansen et al., 2009) Lubatkin et al., (2006) theorized that behavioral integration is an important aspect for management to reach ambidexterity. Indeed, a behavioral integrated management team is superior in deepening explicit knowledge needed for exploitation and combining tacit knowledge needed for exploration (Lubatkin et al., 2006). J. J. Jansen et al. (2009) extended this research by finding support for social integration of the management as predictor for ambidexterity. Hence, power decentralization and collaboration within the top management team is important for determining ambidexterity (Cao, Simsek, & Zhang, 2010). In addition to TMT integration, the leadership by management appears to be essential (Chang & Hughes, 2012). Transformational leadership, leadership characterized by risk taking tolerance and adaptability, and decision risk are characteristics found that positively affect the ambidextrous capability (Chandrasekaran, Linderman, & Schroeder, 2012; Chang & Hughes, 2012; J. J. P. Jansen et al., 2008). As such, both of the strategies to achieve ambidexterity are dependent on the managerial capabilities of the firm.

As external forces shape strategy the environment of the firm plays a major role in determining the effectiveness for ambidexterity (Porter, 1979). Floyd & Lane (2000) propose that the characteristics of the environment play an important role in the effectiveness of strategy of the firm. The need to renew current competencies and improve current competencies is related to the characteristics of the local environment of the firm. Hence, firms should align strategy in congruence to the characteristics of the environment to sustain performance. This proposition is confirmed by Auh & Menguc (2005). They found that firms under pressure of a highly competitive intensity environment balance exploitation and exploration in order to sustain performance. This is necessary as exploitation is required to keep generating positive cash flows and keep up with the competition, exploration is needed to grab any new opportunities and to differentiate from the competition. Jansen, Van Den

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Bosch, & Volberda (2005, 2006) expand these findings by adding another environmental pressure for firms to pursue high levels of exploitation and exploration. The dynamism of the environment is defined at which rate the environment of the firm changes. High dynamism is characterized by short product life cycles and a high degree of creative destruction (J. J. P. Jansen et al., 2005). To comprehends, environmental characteristics play an important role in determining the effectiveness for an ambidextrous strategy, the combination of environmental dynamism and competiveness pressure the firm to be ambidextrous in order to sustain performance.

The extensive literature on ambidexterity has focused on many aspects of the construct. The effects of structural separation and differentiation (J. J. Jansen et al., 2009; M. L. Tushman & O’Reilly III, 1996). The contextual environment of individuals (Gibson & Birkinshaw, 2004). The role of TMT and leadership in ambidexterity (Chang & Hughes, 2012; J. J. P. Jansen et al., 2008). The environment of the firm (Auh & Menguc, 2005; J. J. P. Jansen et al., 2005). Firm size and the resource endowment (Cao, Gedajlovic, & Zhang, 2009; J. J. P. Jansen et al., 2012). An increasingly interesting topic in the business literature is the role of the entrepreneurs in creating tech ventures that bring radical innovations sometimes paired with creative destruction.

2.2 Emerging Ventures and the Entrepreneurial Context

In this study founders are defined as the entrepreneurs of the emerging technology ventures which, from a Schumpeterian perspective, are created by making new combinations in resources (Carland, Hoy, Boulton, & Carland, 1984). New combinations may bring such innovation that will disturb economic equilibrium and temporarily provide the entrepreneur with entrepreneurial rents (Alvarez, 2007). For further setting the entrepreneurial context the focus will be on interaction of the founders with private equity investors, namely venture capital (VC). VC specializes in the investments in these ventures and consist as the first professional investor in the lifetime of the venture (Hellmann & Puri, 2002). In the entrepreneurial context they are an key actor regarding resources, development and professionalization of the venture (Hellmann & Puri, 2002; Simsek et al., 2015).

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The founders of technology ventures are driven to develop their ideas to receive recognition of their ability in the technical field (Corman et al., 1988). They do fear of failure but use this fear as learning and motivation to succeed. For them it is critical to be independent and thus have a need for control and personal freedom (Clarke & Holt, 2010; Corman et al., 1988). They are often highly educated and as opposed to managers, they do not concern about the risk of unemployment and have a high tolerance for risk (Corman et al., 1988). In contrary to many believes, to increase their personal wealth is not their main motivation (Kuratko, Hornsby, & Naffziger, 1997). While developing the firm they have a great personal involvement in the firm and a strong feeling of responsibility (Corman et al., 1988). However, many of these entrepreneurs lack the solid management experience that is needed to lead a developing venture, they learn as they do (Corman et al., 1988). Some keep their focus solely on developing the technology of the venture and hire experts for the management in the firm while others learn to develop these skill.

Another resource that entrepreneurs lack is the capital to fuel their technology and venture into matureness. At the start of the new venture the entrepreneur usually finances its operations by using his own capital and external capital provided by family and friends (Gompers & Sahlman, 2001). Once the technology venture starts growing additional capital is needed to sustain this development and stay ahead of the competition. As these ventures are often not yet profitable and lack tangible assets, debt financing is a not an option (Denis, 2004). Therefore, external sources for financing need to be tapped. As the venture passes the stage of its greatest uncertainty the start-up becomes attractive for private equity investors that specialize in new venture investment: venture capital (VC). VC plays a major role in the financing, developing and nurturing of high potential, high risk ventures (Barry, 1994; Barry et al., 1990; Gompers & Lerner, 1997; Gorman & Sahlman, 1989). Beyond the supply of capital they bring the venture a great know-how regarding financial, operational and market expertise (Barry et al., 1990; Kaplan & Stromberg, 2001). Furthermore, the governance provided by the VC evaluates how well resources are aligned with the goals of the venture. By identifying weaknesses and making operational adjustments to the resource base they increase the chance of

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surviving in the competitive market. In addition, because of the reputation and extensive network possessed by the VC the venture obtains the possibility to access and acquire resources from new places (Grant, 1996; Stuart, Hoang, & Hybels, 1999). The presence of the investments of a VC in a venture works as a certification mechanism that signals the state of increased monitoring and a certainty that the firm is prepared to face competitive market challenges (Barry et al., 1990). In this sense the VC thus complements the entrepreneurial venture with resources such as capital, operational and market expertise, networks and enhances the reputation of the venture. Founders recognize the value added by the VC and as a result, entrepreneurs with multiple investment offers are prepared to pay more for high reputable VC (Hsu, 2004).

In exchange for its investment the VC not only requires an equity stake in the firm but also the means to exercise monitoring and control. They accomplish this by acquiring board seats, voting power and various other rights of control. This is illustrated by the high technology ventures sample of Kaplan & Stromberg (2001) in which the majority of the board is controlled by VC. In evaluating ventures for new investments, VC value the management team as most important criteria for investing (Vinig & De Haan, 2002). They emphasize the role of the CEO and TMT as a whole in predicting the success of the venture and therefore endeavor the right to appoint and release them. It is not uncommon to see VC dismiss and replace the founding members if they are found incapable (Hellmann, 1998). VC further influence the management composition by formulating human resource policies, introducing stock option plans and hiring new management (Hellmann & Puri, 2002). Obtaining instruments for governance is not the only method VC use to reduce the risks. The investments in ventures is done in stages, often linked to performance milestones that the VC sets for the venture (Gompers & Sahlman, 2001). Once a milestones is reached a new investment round is hosted. Each investment done by the VC strengthens its equity position in the venture. Investments rounds also provide an opportunity for new investors to invest in the firm. It is highly probable that once a VC invested in the firm more VC firms invest as these investors often invest in syndicates to spread risk (Barry et al., 1990). In turn, the

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founders of the venture are reluctant to give up equity in the venture resulting in bargaining between the founders and investors at each round of investment to determine the value of the venture.

As the venture continues to grow, additional capital is required to further expand, develop or/and become profitable. In turn, the current investors present in the firm start looking for ways to make the investments they have made liquid (Pástor, Taylor, & Veronesi, 2009). An option that fulfils both needs is the initial public offering (IPO). This option of going public comes with several advantages and disadvantages for the venture, the founder(s) and its investors. The advantage of going public is the cost and the amount of capital that can be raised by new types of investors. This capital is easier to rise from public investors as public shares are liquid and thus it is easier for them to diversify their investments. The liquidity is also a major advantage for the current investors in the firm as they get the opportunity to sell their shares to the public and serves as the main source of rents for VC. However, the act of stepping out the venture is not done at the same time as the IPO as it sends out a bad signal to public investors negatively affecting the share value (Denis, 2004). Another advantage of going public can be interpreted in a strategic way. Getting listed at the stock market sends out a signal of stability and trustworthiness and thus increases the reputation of the venture (Gompers & Sahlman, 2001). Some stock markets even bear a unique reputation themselves which can act as a complementary asset for the venture. For example, companies that get listed at the NASDAQ often bear the reputation of being high potential technology companies while the NYSE bears the reputation of larger established companies and prestige. Another strategic advantage includes getting an early mover advantage on your competitors in acquiring the credibility of stability and trustworthiness. Supplementary to these advantages, some disadvantages exist as well. The process of going public requires banks to be used as underwriters with fees of 10% of the total money raised at the IPO. Another disadvantage stems from the requirements of the stock exchange; public companies need to disclose some of the privately held information such as financial information and equity structure. Finally, the capital markets are more sensitive to the current performance of the venture than the promise of the future. The current and past earnings of the venture is the most important signal

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towards new investors (Brau & Fawcett, 2006). Thus, the option of going public comes with considerations for the founders and investors in the venture.

Even though both parties share the interest of successfully developing the venture, the goals of the founder and investors are not fully aligned (Zacharakis, Erikson, & George, 2010). Entrepreneurs, driven by personal traits such as peer recognition and a drive for independence, are motivated to further develop and grow the venture (Corman et al., 1988; Kuratko et al., 1997). Going public brings the founders financial resources to facilitate this further development and growth. In addition, they have a feeling of responsibility for the firm and a strong personal connection (Corman et al., 1988). Therefore they are keen to continue the success of the new venture as long as they are connected to the firm. Opposed to the founders the goal of VC is to generate rents and they do so by investing in emerging ventures. By successfully using their expertise, controls and network they nurture the venture in becoming a success (Barry, 1994; Barry et al., 1990). The resources and capabilities of the VC are specialized to developing emerging technology ventures; the growth phase of these ventures is where they excel in adding value (Sapienza, 1992). Just as they use the entry strategy for investing, they have an exit strategy which comes short after going public (Denis, 2004). At the moment the venture becomes public it will be valued by the public markets and determine the rents of the VC and other investors. VC are known to focus on short term objectives such as the boosting of sales to construct ideal IPO conditions for higher returns (Bertoni, Colombo, & Grilli, 2011; Carpenter, Pollock, & Leary, 2003; Zacharakis et al., 2010). As such, the goals of the founder and the VC (investors) are not aligned at the time of the IPO which might resonate through the strategy of the venture.

3. Theory development and framework

3.1 Emerging Ventures and Ambidexterity

When applying ambidexterity theory to analyze the entrepreneurial context the role of the founders, as leaders of the venture, appears to be essential for achieving ambidexterity. For SME the role of TMT

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is emphasized as SME lack slack resources for a simultaneous pursuit of exploration and exploitation (Chang & Hughes, 2012). The leaders of the SME play an essential role in securing resources to pursue an ambidextrous strategy. Management that is able to make new commitments without compromising on the status quo promotes ambidexterity. As such, the ambidextrous capability possessed by the venture might be the result of the ambidexterity capabilities held by management (Mom, Van Den Bosch, & Volberda, 2007). Hence, management that displays ambidextrous behavior will positively affect the ambidextrous behavior of the organization (Chang & Hughes, 2012; Hambrick & Mason, 1984). This reasoning is in line with the upper echelon theory which states that firms are a direct reflection of its upper management layer (Hambrick & Mason, 1984). Built upon bounded rationality, the theory of upper echelon recognizes the cognitive limits in human beings in understanding the complexity of the environment and consequences of decisions. As such, top executives act based on the personal interpretation they have of the environment (Hambrick, 2007). Subsequently, these interpretations can be deduced by analyzing the experience, values and personality of the executives. As such, the personal characteristics and demographics of the top management layer plays an important factor in creating and predicting firm strategy and organizational ambidexterity. In these ventures, the unique context exists where the upper management layer not only lies at the strategic heart of the venture but, the key actors that shaped the venture, are still present (Daily, McDougall, Covin, & Dalton, 2002; Simsek et al., 2015). The founders of the venture built and led the venture to it status quo while the early stage investors facilitated this growth and complemented the venture with resources. The presence and the interaction between the two key actors, the founder and the venture capitalist, in the entrepreneurial venture is apparent at the level BODs.

3.2 Board composition, founders and ambidexterity

Research on corporate boards has proven that the composition of the board has an important role in influencing the strategy of the firm. Dependent on the actors and their background and interest, board composition influences strategy in various ways. Carpenter et al. (2003) found that technology IPO ventures are more likely to pursue an internationalization strategy when the board composition

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exist out of a high amount of outside and independent directors possessing international business experience. Normally, such strategy is considered as a high risk at this stage of the venture but the experience possessed by outside board members decreases the risk perceived and encourages a internationalization strategy (Carpenter et al., 2003). Other demographic characteristics possessed by board members are found to impact firm strategy. The average tenure, age and background of board members are found to be an determinant the firm willingness to incline strategic change (Golden & Zajac, 2001). A high ratio of outside directors is also found to impact the degree to which a firm follows an long term intensive R&D investment strategy (Kor, 2006). Managers tend to be risk aversive and short term minded. Outside independent directors can negate this effect but only when their ration suffices the power and independency to challenge the management team of the firm. This effect is driven by the goals of the independent directors to represent the long term vision of the shareholders of the firm (Kor, 2006). As such, the characteristics and goals held by board directors are important in the reflection of firm strategy.

Subsequently, in contrary to large and mature firms the boards of these emerging ventures are more active in the strategic management of the firm which can be contributed to a variety of reasons. The boards in these ventures are relatively small promoting the interaction between the board members and their involvement in the strategy of the venture (Sapienza et al., 2000). The level of board independency is also a factor that increases the involvement of the board in venture strategy. A high ratio of independent directors present in the venture also increases the amount of control the board can exercise over TMT to their goal (Sapienza et al., 2000). Another factor increasing the strategic involvement is the presence of large block holders of shares which not only increases their incentive for monitoring and control but also gives them power over management (Baysinger, Kosnik, & Turk, 1991; Fried, Bruton, & Hisrich, 1998). These aspects amplify the role of the BODs and the impact they have on the strategy of the venture.

When focusing on the founders of the venture and considering the characteristics associated with them they should be more ambidextrous by nature. Founders possess a higher tolerance for risk

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which allows them to frame opportunities in different ways compared to managers allowing a better understanding of opportunities (Chandrasekaran et al., 2012; Chang & Hughes, 2012; Mullins & Forlani, 2005). Consequently, this understanding is important for making commitments to the new explorative activities necessary for innovating and long term performance but also important for protecting the investments already made. In the dynamic context of technologic emerging ventures this skill is especially important for adapting to a changing environment (J. J. P. Jansen et al., 2005).

Founders that exhibit behavior characterized by a high tolerance for risk signal employees of the venture that the same behavior is accepted and encouraged in the venture (Hambrick & Mason, 1984). Also, failure is seen as motivator instead of restraining innovative behavior (Corman et al., 1988). Employees are then more willing to take risks and experiment themselves resulting in an supportive environment for creating new innovations (Chang & Hughes, 2012; Gibson & Birkinshaw, 2004). As founders shaped and built the venture this behavior could be part of the corporate process and environment active in the venture and stimulate individuals to contribute to the ambidextrous capability of the venture (Gibson & Birkinshaw, 2004).

The founders of these ventures are driven by intrinsic reasons and aspire long term success for the venture as long as they are connected to it (Corman et al., 1988). Aspirations to develop the technology and enhance their reputation are aspirations that require a long term commitment. For long term performance and survival both exploration and exploitation are seen as essential (March, 1991). A balance between the two capabilities is especially important in the dynamic environment of emerging venture (J. J. P. Jansen et al., 2008). As such, it is in the interest of the founders to develop both capabilities for achieving their aspirations.

By following the predictions of upper echelon theory and the characteristics and goals held by the founder we believe that founders seated on the board of directors will have positive effect on the ambidextrous capability of the firm. Thus, the more seats the founders hold in the board of directors the more likely their ambidextrous nature will be reflected throughout the venture and its strategy. In addition, when considering the BODs as a group with different actors it is likely that the founders of

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the venture are more alike. We argue that they are more similar in characteristics, share in goal preference and have the longest work relationship with any of the members of the board. From this perspective an increase in the amount of board seats held by founders will improve the behavioral integration of the board (Lubatkin et al., 2006; Simsek, Veiga, Lubatkin, & Dino, 2005). This integration results of a better comprehension and use of the knowledge available on the board in making strategic decisions. The share in goal preference also enhances the presence of shared vision on the board (J. J. P. Jansen et al., 2008; M. L. Tushman & O’Reilly III, 1996). These aspects, behavioral integration and shared vision, allows a better management of the complexity and tensions inherent to an ambidextrous strategy (J. J. P. Jansen et al., 2008; Lubatkin et al., 2006). This results in the following hypothesis;

Hypothesis 1

Board composition will effect ambidexterity in such a way that the amount of founders will positively affect ambidexterity

3.3 Board Leadership and Ownership Power

It could be that the amount of founders seated in the board of directors is not sufficient enough to establish this relationship. As previously mentioned, the BODs of these ventures are often occupied by various parties with different preferences in goals (Sapienza et al., 2000). In these technology ventures a large part of the ownership of the firm is distributed among these different parties resulting in differences in power on the BODs. In example, a single board member that owns 40% of the firm stocks is more powerful in voting than three board members that together own 20% of the firm stock. The board member with 40% could use this power to exert more influence and voice within the BODs. Also, within the BODs differences exists between the functional positions of the board members. In example, the chairmen of the board is in a leadership position and thus more influential than other directors active on the corporate board (Randøy & Goel, 2003). Therefore, the power possessed by the

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members of the BODs is found to be an moderator to determine its influence on the board and thus firm strategy (Golden & Zajac, 2001). Hence, this makes that founding members on the BODs need power in the addition to the board seats they possess to exercise influence. Two conditions to amplify the relationship are proposed; a leadership position in the BODs and ownership power.

When seated on the board founders are considered to be more powerful than other directors as they shaped the venture, have a long-term interaction with the board, and hold an unique position as starters of the venture (Finkelstein, 1992). Their long time tenure with the venture provided them with an extensive network inside the venture which they can use to exert influence (Bala Chakravarthy & Peter Lorange, 2008). This network also provides founders with more information about the venture when compared to other directors on the board (Finkelstein, 1992). Founders can use the connections they have with the employees of the venture to access information. In addition, as these technology ventures are often built upon tacit knowledge in the expertise of the founders they have a better comprehension of the information provided which makes the information more valuable to them. Therefore, founders are considered more powerful than other board members who have the same position.

On the BODs there are two functional positions that provide board members with additional power, the chairman of the board and the CEO (Randøy & Goel, 2003). The chairman of the board leads the BODs, ensures it effectiveness, and provides the other members of the board with the information needed to exert their task of monitoring and providing advice to the management of the venture. The CEO is responsible for the daily management of the venture and usually holds the right to appoint the directors in the BODs (Wasserman, 2003). However, as investors require the right to hold board seats for monitoring in return for investing the effect to appoint directors is limited(Kaplan & Stromberg, 2001). A leadership position holds a formal position above the other board members providing them a higher authority within the BODs allowing them to better direct the board to their willing (Finkelstein, 1992).

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A leadership position held by the founders of the firm will not only amplify the influence they have on the BODs. It puts the founders in a position of leadership which should, combined with their entrepreneurial characteristics, promote the ability of the venture to deal with conflicting tensions (Chandrasekaran et al., 2012; Chang & Hughes, 2012). It also promotes the concept of signaling accepted behavior to employees (Hambrick & Mason, 1984). As such, a leadership position held by at least one of the founders will positively affect the organizational ambidexterity capability of the venture. This leads to the following hypothesis;

Hypothesis 2

The relationship between the amount of founders on the board of directors and ambidexterity will be positively moderated by the leadership position hold by one of the founders.

The second factor that discriminates the positions within the BODs is ownership power. In agency theory stock ownership is used to align the goals between principals and agents (Jensen, 1994). In emerging venture there is no clear distinction as founders can be both a principal and agent (Sapienza et al., 2000). A low ownership stake possessed by the founders (agent) of the venture would indicate that the founder has to follow the investors (principal) of the venture. Considering the short term goals of IPO profit by the main investors of venture a low ownership stake would negatively impact the ambidextrous capability. While a high ownership stake would allow the founders to act regarding the long term goals they possess and positively impact the ambidextrous capability of the venture. However, in context of the emerging venture it is hard to distinguish between principals and agents as the roles fluctuate over time.

Most boards have little influence in limiting managerial discretion of the management in the firm (Finkelstein & Hambrick, 1990). However, as mentioned before the boards of high tech ventures are occupied by large block holders which gives them power over the management of the firm and the ability to limit managerial discretion (Hambrick & Finkelstein, 1987). This constrains the latitude of

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founders in making strategic decisions. In turn, founders with high ownership power have stronger positions in the board of directors which will increase their strategic freedom. From this perspective, ownership power amplifies the strategic freedom the founders have on the board of directors and thus amplifies the effect the founders have on organizational ambidexterity. While founders that possess a high amount of ownership in the venture are also able to limit the involvement of other board members in strategy of the venture (Sapienza et al., 2000).Proposing the following hypothesis;

Hypothesis 3

The relationship between the amount of founders on the board of directors and ambidexterity will be positively moderated by the ownership ratio of the founders.

Hypothesis 4

The combination of the moderator’s, founder leadership and ownership power, will amplify and positively effect of the amount of founders on the board of directors on ambidexterity.

3.4 Ambidexterity and Emerging Venture Performance

According to ambidexterity theory firms should be ambidextrous in order to achieve and sustain high performance. Multiple studies on ambidexterity have established the positive effect of ambidexterity on various performance outcomes in the context of SME and large firms (Auh & Menguc, 2005; Chandrasekaran et al., 2012; Chang & Hughes, 2012; He & Wong, 2004; Lubatkin et al., 2006). Ambidextrous firms are capable to capitalize on current technologies as well as to adapt to future changes and therefore enjoy higher rate of survival. For entrepreneurial ventures, achieving a balance between exploitation and exploration may be especially difficult due the lack of slack resources, financial reserves and the differences in interest by the owners of the venture (ie. the founders and VC). In turn, the construct has shown to have especially positive effects on performance in environments characterized by dynamism and competitiveness which resembles the environment of

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these technology ventures (Auh & Menguc, 2005; J. J. P. Jansen et al., 2005, 2006). Such environments provide pressure to focus making ventures more vulnerable to trapping themselves. Too much focus in one of the two activities that together constitute ambidexterity may result in facing a failure trap or a success trap and puts the ventures behind the competition (Levinthal & Mawhicrch, 1993). As such, an ambidextrous strategy prevents ventures from trapping themselves which positively contributes to the long term performance of the venture. Therefore the following hypothesis is proposed;

Hypothesis 5

Ambidexterity mediates the positive relationship between the amount of founding members active on the board of directors and performance in entrepreneurial technology ventures when moderated by founder leadership and founder ownership

3.5 Conceptual Model

H. 2 Controls Firm Age Industry Firm Size Board Independence H. 1 H. 5 H. 3 Founder Ownership Power Founder Leadership Amount of Founders BODs

Ambidexterity _PerformanceVenture

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4. Methodology

4.1 Research design

The predictor variable in this research design is founder ratio and the dependent variable is performance. A full mediation is hypothesized between founder ratio and performance by the variable ambidexterity. Two moderating variables, founder leadership and founder ownership, are proposed to have a positive effect on the relationship between founder ratio and ambidexterity. A quantitative method is used for testing the model. The data was collected by combining multiple secondary sources of data into a single dataset. The model was tested using a correlation analysis and multiple linear regression analysis.

4.2 Sample and data collection

For testing the hypothesis a sample of emerging technology companies has been selected. The sample was taken from ventures that went public on the NASDAQ stock exchange between July 2013 and June 2014. A year was framed to reduce variation by environmental conditions in time. This specific sample was selected for several reasons. The NASDAQ is known for its technology reputation and the listing of smaller emerging technology ventures (Schwert, 2002). The action of going public provides a moment at which firms have to disclose private information to the public for the first time. Before this moment, the privately held data is hard to access and identify. Thus, the moment of the IPO is the earliest point in time this data is publicly accessible for research purposes. At this moment the founders of the venture and early stage investors such as VC are still present within the firm and share in ownership providing the entrepreneurial context previously illustrated in this study. In addition, technology companies are pressured by the environment in becoming ambidextrous in order to sustain performance (Auh & Menguc, 2005; J. J. P. Jansen et al., 2006). There was also a practical reason for selecting technology companies; ambidexterity was measured using data on patents.

Extracting the IPOs from this period resulted in an initial sample of 165 companies. Subsequently, non-technology companies such as financial companies, blank-check companies,

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insurance companies and retail companies were removed as they did not fit in with the technology requirement. Other companies that were formed solely for the purpose of the IPO and companies formerly registered on the stock exchange were removed as well as they have previous experience as public companies and therefore did not fit the study. This reduced the sample with 22 companies and resulted in a sample size of 143. For measuring the ambidexterity variable a method was used that analyses the patent portfolio of the companies. Therefore to use this method a patent portfolio is needed that fulfils the measuring criteria. Applying this criterion further reduced the sample to the amount of 59 companies. Finally the companies were assessed for the presence of founders and/or block investors (VC) as board members and/or owners which did not reduced the sample further.

For collecting the data the SEC filings at the NASDAQ website and the patents registered at the United States Patent and Trademark Office (USPT) were used. The SEC form 424B1/5 (the IPO prospectus) is the filing companies need to disclose before they go public and contains information such as: financial statements, ownership structure, management information, products and strategy. These filings were used to extract data regarding; firm age, firm activities and subsidiaries, the amount of employees, the board composition and the ownership structure of the firm. Then year reports filed to the SEC were used to extract accounted financial information on the years 2012 to 2014. Initially, the database Bureau van Dijk ORBIS was used for collecting data but when comparing the source of data with the SEC filings for accuracy, the ORBIS database proved inconsistent and incomplete. Therefore, the SEC filings were favored above the database. The filings are computed by the management of the firm and checked by lawyers and accountants. Purposely displaying incorrect information to mislead investors is considered a crime. Given these requirements these filings are considered a reliable source of data (Welbourne & Andrews, 1996). The USPT database was used to access the patent portfolios of the firms. As some firms have patents registered on different names (subsidiaries, R&D departments) multiple sources, the Bureau can Dijk ORBIS database, SEC filings and company websites were used to increase the accuracy of the each patent portfolio. By using the USPT, only patents registered in the US were collected. As 50 of the 59 companies in the final sample

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originated in the US and all of the 59 companies have activities in the US the restriction of using US patents is unlikely to form a problem. In addition, the US provides a strong institutional environment that provides protection and the appropriation of patents encouraging companies in registering patents (Maskus, 2000).

4.3 Description of the variables

4.3.1 Independent Variables

Founder ratio. Hypothesis 1, 2, 3 and 4 test the effect of the amount of founders present in the board of directors on ambidexterity in various conditions. 38 of the 59 companies had founders active in the BODs. Founders of the venture were identified using SEC filings and the company website as a single source sometimes gave inconsistent results. The amount of founders active as director in the BODs was then taken. As differences in overall board size exists between firms the total amount of board members was taken so the ratio of founders of the total board size could be calculated. By using the founders as ratio of the BODs this study uses the similar methods of operationalizing other groups of board members such as independent directors and inside directors (Baysinger et al., 1991; Bruton, Filatotchev, Chahine, & Wright, 2010). This resulted in a standardized value of founder ratio varying between 0 and 1.

4.3.2 Moderating variable

Founder leadership. Hypothesis 2 and 4 tests if founder leadership moderates the relationship between founder ratio and ambidexterity. Founder leadership was operationalized using the method by Randøy & Goel (2003). Founding members are considered to have a leadership position within the BODs if they have a position of CEO or Chairmen of the board. By having a leadership position founders have more influence over the board and are in a position to pursue entrepreneurial opportunities (Randøy & Goel, 2003). In the sample, 29 of the 59 companies had a founding member present as CEO or chairmen. This data is collected using the SEC filings which provide qualitative personal information on each

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member of the BODs. A binary variable was created with 0 representing no founder in a leadership position and 1 representing a founder in a leadership position.

Founder ownership. Hypothesis 3 and 4 tests if founder ownership moderates the relationship between founder ratio and ambidexterity. Founder ownership was operationalized using the method of ownership power by Finkelstein (1992). The ownership power by each founder was determined by the shares of possessed and the shares of possessed by affiliates of the founder such as family. Originally, this method was used for determining the power of managers and included the measure if the person is related or affiliated to one of the founders. Since we focus solely on founders, this item was not included. The measure by Finkelstein, (1992) was chosen as it provided the best fit when analyzing the BODs and its division of power. In the study of Finkelstein (1992) ownership power showed a low correlation with perceived power when compared to other types of power. This was explained by the proposition that owners are less involved in the strategic management of the firm. However, as the founders and investors of entrepreneurial ventures are highly active in the strategic management of the venture there should be a validity. To measure the total ownership power by a group of founders the values were accumulated. 39 of the 59 ventures had founders with ownership power. The ownership in shares was taken as a percentage of the total amount of shares and thus constitutes as a ratio between 0 and 1.

4.3.3 Mediating Variable

Ambidexterity. Hypothesis 1, 2, 3 and 4 measure the effect of founder board ratio on ambidexterity. Hypothesis 4 measures the effect of ambidexterity on performance. For measuring the ambidexterity variable a method created by Katila & Ahuja (2002) has been used. This method compares citations of granted patents in a firm’s focal year (the IPO year) with the citations of patents in the previous five years to determine the level of exploitation and exploration. The patent portfolios of companies are attained from the U.S. Patent and Trademark Office. A patent citation which is not used in the previous five years is seen as an act to master new knowledge to the firm and thus counts as exploration. While a patent citation repeatedly used in the previous five years is seen as an act to deepen existing

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knowledge and thus counts as exploration. These two variables are then multiplied with each other to compute the ambidexterity variable which gives a number of at least 0. By using a multiplication as interaction effect the interdependency and non-substitutability between the two is recognized (Gibson & Birkinshaw, 2004).

4.3.4 Dependent variable

Performance. Hypothesis 5 measures the mediating effect of ambidexterity on performance. Performance is measured using the return on assets (ROA). Initially the study included a second performance measure, revenue growth to create a multidimensional construct. However, a number of companies in the sample lacked the presence of revenues which resulted in inconsistencies. Therefore only the ROA is taken as performance measure. The ROA itself is considered a reliable performance measure and shows a high correlation with other performance measures (Kothari, Leone, & Wasley, 2005). As the sample size was small and the industries divers the method of comparing the venture ROA to its industry mean was not used.

4.3.5 Control variables

For improving the validity of the study several control variables are included in the study. These variables are known to interact with the variables in the hypothesized model and are included to rule out the effects they have.

Firm age. The age of the venture was included as it could impact the founder ratio, performance and ambidexterity and is therefore taken as a control measure. As the firm increases in age the probability of founders leaving the firm increases. Once firms get older and more established they have the tendency to focus more on exploitative efforts as new innovations might decimate and replace current practices (M. L. Tushman & O’Reilly III, 1996). Firm age was measured by taking the natural log of the age of the firm at the time of the IPO following J. J. Jansen et al. (2009).

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Industry. Even though the sample was focused at technology ventures there was no focus on a specific industry. Therefore differences could exist between industries and are therefore controlled in the analyzation. Using the first 3 SIC codes the companies were distributed amongst 23 industries.

Firm size. The size of the firm was taken as a control variable for its possible effect on ambidexterity and performance. It is resource intensive to focus on both exploration and exploitation at the same time, as larger firms possess more resources or slack it is easier for them to achieve high levels of ambidexterity and/or have better performance (Cao et al., 2009; J. J. P. Jansen et al., 2012). In turn, SME have fewer hierarchical levels which increases the impact of the top management layer of the venture (Chang & Hughes, 2012; Simsek et al., 2015). Firm size is measured by taking the natural log of the amount of full time employees active in the firm following J. J. Jansen et al. (2009).

Board independence. A high amount of independent board active within the BODs impacts firms strategy in such a way that it promotes a diversification strategy (Hoskisson, Johnson, & Moesel, 1994). This might affect which tendency firms have in focusing on exploitative or explorative efforts. Directors are considered independent when they are an outside director on the BODs, not employed by the firm, and have no further affiliation with the firm such as past employment and family (Hoskisson et al., 1994). Board independence was measured as the amount of independent directors on the BODs as ratio of the total amount of directors.

5. Results

For analyzing the data the statistical software SPSS (version 21.0) was used. Prior to the analyses each of the variables was checked for normality and outliers. The variables founder ownership power, ambidexterity and board independence did not meet the assumption of normality and were transformed. Ownership power was transformed using a cubic root transformation while ambidexterity was transformed using a square root transformation. Board independence was squared as transformation. The descriptive statistics of the variables before transformation are displayed in the Appendix I. A correlation analysis was performed using Pearson’s correlation coefficient. For

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conducting the regression analyses a hierarchical linear regression and the process script by Andrew F Hayes have been used (Hayes, 2012).

5.1 Correlations

Table 1 portrays the bivariate correlations between the different variables. A significant correlation depicts a relationship between two variables but does not provide the direction of the relationship. Starting with the independent variables, the variable founder ratio has a strong positive correlation with founder leadership (r = .62) and founder ownership (r = .68). This was as expected; higher amounts of founders on the board are paired with leadership positions and higher amounts of ownership. Founder ratio also shows a weak negative correlation with board independence (r = -.28), as founders are often employed or formerly employed by the firm and therefore unlikely to be an independent director. The strong correlation between founder leadership and founder ownership (r = .62) suggests that once a founder is in a leadership position it is paired with higher amounts of ownership in the venture. There was no significant correlation found between any of the predictor variables and ambidexterity, the non-significant correlation was very weak (< 0.2). The mediating variable ambidexterity has a weak positive correlation with performance (r = .27) which possibly confirms that higher levels of ambidexterity increase the performance of the firm. The control variable firm age show a positive moderate correlation with firm size (r = .46) and performance (r = .49) thus older firm are likely to be larger in size and have higher performance. Industry correlates weak with firm size (r = .32) indicating for differences in firm size between industries. Consequently, firm size correlates moderately with performance (r = .56) indicating that larger firms have a better performance. Finally, board independence shows a weak negative correlation with firm size (r = -.28). Even though there was no strong correlation found between the independent variables, moderators and mediating variable, and the control variables, it was still theoretically important to consider all the control variables in the model.

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Table 1. Means, Standard Deviations and Correlations

Variable M SD 1 2 3 4 5 6 7 8 1. Firm Age 1.01 0.27 2. Industry 13.71 4.95 -.03 3. Firm Size 2.02 0.72 .46*** .32** 4. Board Independence 0.51 0.24 -.05 -.25* -.28** 5. Founder Ratio 0.12 0.11 -.19 .01 -.12 -.31** 6. Founder Leadership 0.49 0.50 -.05 .03 .08 -.04 .62*** 7. Founder Ownership 0.34 0.29 -.15 -.01 .08 -.27 .68*** .62*** 8. Ambidexterity 0.47 0.31 .14 .07 .06 .10 -.03 .01 -.13 9. Performance -0.29 0.26 .49** .02 .56*** .00 -.22* -.03 -.16 .27** N = 59. * p ≤ 0.10, ** p ≤ 0.05, *** p ≤ 0.01

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5.2 Regression

For testing hypothesis 1, 2, 3 and 4 a hierarchical linear regression analysis was used. Hypothesis 5 was tested using the macro process (v. 2.15) for SPSS using model 9 (Hayes, 2012). During the analyses, the data was checked to meet the assumption coherent to the regression such as multicollinearity, independent errors, linearity and homoscedasticity.

In step one of the regression analyses the control variables predictive value on the dependent variable ambidexterity is tested and displayed as model 1 in the table 2. At this stage the control variables appear to have no significant effect on ambidexterity. For the second step, the predictive variable founder ratio was added to the regression for testing hypothesis 1 and displayed as model 2. By adding this variable there was a tiny rise in explanatory value that was neglectable and the statistical value of the model decreases thus finding no support for hypothesis 1. In step three the moderating variable founder leadership (founder ratio * founder leadership) was entered into the model for testing hypothesis 2 and is shown as model 3 in the table. A positive beta was found for the moderator suggesting a positive moderation. Again, there was a slight increase in the explanatory value of the model and the statistical value of the model decreases. Hence, no evidence was found to support hypothesis 2. Model 4 displays the results of step four for testing hypothesis 3 and 4. In this step the moderator founder ownership (founder ratio * founder ownership) was entered into the analysis. This results in a notable increase in explanatory value and a significant increase in statistical value. R² = .224 and R² adjusted = .082. By including the two moderators into the model the positive effect of the predictor variable founder ratio on the dependent variable ambidexterity appears to be significant (β = .459, t(1, 49) = 2.02, p < .05). Another positive effect was found by the moderating variable founder leadership (β = .479. t (1, 49) = 2.52, p < .05). Interestingly, the moderating variable founder ownership negatively affects the relationship between founder ratio and ambidexterity (β = -.610, t (1, 49) = -3.17, p < .01). In the model none of the control variables appear to have any significant effect on the dependent variable. However, the statistical value of the model is non-significant (F (7, 51) 1.0282, p > .05) finding no support for hypothesis 1, 2, 3 and 4.

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Table 2. Hierarchical Regression Analysis: outcome Ambidexterity

Variables Model 1 Model 2 Model 3 Model 4

β p β p β p β p Control variables Firm Age .156 .31 .164 .30 .158 .33 .148 .33 Industry .114 .44 .116 .43 .110 .47 .125 .38 Firm Size -.015 .93 -.008 .96 .004 .98 .002 .99 Board Independence .136 .34 .153 .32 .158 .33 .183 .23 Independent Variables Founder Ratio .047 .75 .076 .71 .459** .05 Founder Leadership -.026 .89 -.308 .16 Founder Ownership -.148 .47 Interaction Effects

Founder Ratio * Founder Leadership .074 .60 .479** .02

Founder Ratio * Founder Ownership -.610*** .002

Model statistics

F 0.607 0.659 0.498 0.78 0.384 .91 1.576 .15

R² .043 .045 .050 .224

F Change 0.102 0.139 5.509***

ΔR² .002 .005 .174

n=59. All Betas are standardized. * p ≤ 0.10, ** p ≤ 0.05, *** p ≤ 0.01

As there was no support found for hypothesis 1, 2, 3 and 4 the mediation effect of ambidexterity proposed in hypothesis 5 is not supported. However, it is still interesting to see the effect of ambidexterity and founder ratio on performance. For testing this effect the macro process for SPSS was used, selecting model 9. The effect of founder ratio on performance was included in this model to eliminate the possibility of a direct effect by the predictor variable. Table 3 depicts the outcome of the test. Ambidexterity is found to positively predict performance (β = .210, t (1, 52) = 2.00, p ≤ .05). There was no direct effect found by founder ratio on performance. Also, two of the control variables positively predict performance; firm age (β = .212, t (1, 52) = 1.76, p < .10) and firm size (β = .498, t (1, 52) = 3.86, p < .001). The overall model was found to be significant (F (6, 52) 7.220, p < .01) explaining 45.4% of the variance.

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Table 3. Regression analysis: outcome Performance

Variables Model 6 beta se β p Control variables Age .206 .117 .212* .09 Industry -.007 .006 -.125 .27 Size .183 .048 .498*** <.001 Board Independence .080 .130 .072 .54 Founder Ratio -.198 .260 -.085 .45 Independent Variables Ambidexterity 0.182 .090 .210** .05 Model statistics F 7.220*** R² .454 N = 59. * p ≤ 0.10, ** p ≤ 0.05, *** p ≤ 0.01

5.3 Post-hoc analyses

Finally, post-hoc analyses were performed to further explore the results for any mediation effects. We hypothesized that founders with a leadership position and ownership power are more influential in influencing the strategy of the venture. In table 4 the post-hoc analyses show a small range of conditions in which ambidexterity fully mediates the effect between founder ratio and performance. The effect was only significant in the conditions where the value of the moderator founder leadership is 1 and the value of the moderator founder ownership is between the mean and the mean minus one standard deviation. This suggests that founders in a leadership position with average and below average ownership power have the highest impact on ambidexterity which is not fully in line with our expectations.

The effects of founding members on organizational ambidexterity in emerging technology ventures : the moderating role of leadership and ownership